There is a proposal to replace the federal income tax with a national sales tax, dubbed by its proponents the "fair tax," a label that is not only dishonest but downright Orwellian.
The British writer George Orwell, a man of uncompromising intellectual honesty, saw clearly that in politics something can be given a name that is the exact opposite of the reality. Thus in his classic dystopian novel, 1984, published in 1949, the protagonist, Winston Smith, works for the Ministry of Truth, where history is constantly rewritten to fit the ruling party's current line. To cope with his job of spewing out lies for a living, Smith had to engage in doublethink, a word coined by Orwell for simultaneously holding two contradictory beliefs and accepting both of them.
Indeed, doublethink was enshrined in the slogans of the ruling party:
- War is peace
- Freedom is slavery
- Ignorance is strength
To call a national sales tax a "fair tax" is certainly Orwellian when sales taxes are highly regressive. The less income a person makes, the higher percentage of it they have to spend. With spending being taxed, the lower one's income, the higher the percentage of it that goes to taxes.
The fairest basis for taxation is ability to pay, which is based on income. As a person spends a lower percentage of their income as they make more money, a graduated income tax is the fairest of all, for people at higher income levels have more money available to pay taxes.
A national sales tax proposal under the name of the Fair Tax Act (H.R. 25 and S. 296), sponsored by Sen. Saxby Chambliss (R-GA) and Rep. John Linder (R-GA), was first introduced in 1999 and has been buried in committee in every Congress since then. The bill sets a 30 percent sales tax rate on the pre-tax price of goods and services. While it sets a rebate for purchases up to the poverty level, on the whole the rich would pay less in federal taxes while the rest of us would pay more. To collect and administer the national sales tax, the Internal Revenue Service would be replaced by an Excise Tax Bureau and a Sales Tax Bureau.
In 2008, two presidential contenders, former Arkansas Gov. Mike Huckabee, a Republican, and former Sen. Mike Gravel of Alaska, a Democrat, pushed this proposal. Huckabee won a few primaries before his campaign fizzled, while Gravel fell flat on his face.
If someone wants a national sales tax, they should be straightforward and call it what it is, instead of giving it such a dishonest name as the "fair tax." Orwell, who died in 1950, is rolling over in his grave.
Comments
Mr. Hornstein obviously doesn't really understand the FairTax, either intentionally or by accident.
He ignores the fact that the FT bill is a progressive tax based on how much you SPEND (the rebate makes it progressive).
He ignores the fact that any tax system that requires preparation by the person paying is regressive; it is usually complex and requires a person pay money just to make sure they comply.
He quotes the 30% tax number that makes the FairTax seem higher than our present tax burden; if income taxes were reported the same way, they would range from 21.4% to 74.3%. (It's an accounting trick - $20 tax from $100 can be seen as a 20% tax on $100; or it can be reported as $20 into $80-what's left- making that same $20 look like a 25% tax!)
And he ignores the fact that no business pays taxes, but passes their taxes to the consumer, meaning presently we pay ~22% tax on everything we buy. And THEN we pay income tax, MC & SS taxes. Net tax burden: 22%+10%(min)+7.65%=3
Net tax burden: 22%+10%(min)+7.65%=39.65%
what's new. of course the guy doesn't get it. the same incorrect math being spewed out again. thx for the quick and concise correction lord k.
Come on Dave,
this article is not telling the whole story. The Fair Tax IS a progressive tax. No American will pay taxes below the poverty line. Americans will keep their entire paycheck. Manufacturing will return back to this country. Americans will get Careers. This is the biggest transfer of power back to the people.
I do not think Dave wants you to have the power. I wonder why that is.
In the article it states "the rich would pay less in federal taxes while the rest of us would pay more." I believe the rich spends a little more than the rest of us. Since the tax is based on consumption, I believe the rich will be paying a little more tax than the rest of us.
Though I'm against the FairTax for other reasons (despite being a libertarian), it's very clear that you don't understand it at all. Or else you don't understand economics. We don't know which of these (or both) is correct because you provide no outline of what you think the tax is. Ironically you bring up Orwell (an avowed anti-socialist) and Orwellian phrases. Oh you mean like:
"Community Reinvestment Act"
"Stimulus Bill"
"Fair Trade"
"Free Employee Choice" (card check)
Those types of phrases? Please...
ONCE AGAIN AN ARTICLE BY SOMEONE WHO DEGRADES THE FAIRTAX BY NOT QUOTING IT "as written ". I ALWAYS WONDER ABOUT THE MOTIVES OF SOMEONE WHO SUPPOSEDLY HAS READ AND UNDERSTANDS THE FAIRTAX AND STILL OPPOSES IT.
David'' Imagine, to day is already the 21st and no reply from you. Look at all those who know you are not educated about what you write. We are all curious to know why you would want to spout all the false statements that have already been passed around ad nauseum. If you are trying to show how smart you are, Then you have succeeded. However, If you want the facts,and to read many of the other false statements that have been made, please go here. www.fairtax.org/site/PageServer?pagename=about_main
The average American pays more in FICA taxes than income taxes. The FairTax eliminates the FICA tax. No person at or below the poverty line will pay federal taxes after prebates. The middle class are the second largest beneficiaries of reduced tax burdens (after the poor) under the FairTax. Nearly everyone comes out ahead with the FairTax because the tax base is so ddramatically expanded. If, however, after almost 100 years of the income tax system one simply can't grasp tax reform without naming winners and losers here you go: tax lobbyists lose, the Congress loses its ability to further corrupt the system and all those now in the underground economy (estimated at $1.5 trillion a year)lose when they become taxpayers, overnight, as consumers. National leaders also lose the ability to hide the connection between government spending and our own paychecks when taxes are no longer hidden through payroll withholding but clearly visible on every receipt. Winners? ALL THE REST OF US.
Ken Hoagland claims that "The average American pays more in FICA taxes than income taxes. The FairTax eliminates the FICA tax... The middle class are the second largest beneficiaries of reduced tax burdens (after the poor) under the FairTax. .."
The 'fair'tax would replace the income tax, as well as FICA. Its true that roughly 40% of Americans don't pay ANY income tax. So the claim that the average American would benefit from replacing the income tax with a 30% sales tax on most things, including food, rent, medical expenses, etc., is absurd.
Hoagland's claim that "No person at or below the poverty line will pay federal taxes after prebates" is equally absurd. A single person would get a prebate of around $200 per month. The 'fair'tax on $700 rent would be $210, which EXCEEDS the monthly prebate for a single person. $700 rent is around the average rent for most major cities.
Wake up and think people. 37% of all items sold in the US are imports, and have NO US IMBEDDED TAXES IN
I think the real reluctance to pass a "fair" tax is the related inability of the Federal government to collect increased revenues in times of great need. In 1913, the top tax bracket was 7%, but due to the financial burdens of WWI, the top rate increased to a whopping 77% for the top bracket until after the war. By taxing only expenditures, the Federal government would have little control over those who decide - in times of great need - that they're just going to sit on their money and wait and see what happens. This lack of commerce would yield little revenue for the Fed, and raising the flat rate even higher would inversely result in citizens spending even less.
That's why I doubt we'll ever see a "fair" tax linked to purchasing vs. one based on earnings. What really needs to happen is for our Congress to stop fraud, waste, and abuse, stop trying to regulate the economy, and let folks take care of themselves.
Dave Hornstein's comment is attention-grabbing but crude - and incorrect. Hornstein's principal error is in looking at the Fair Tax through a one-year lens. Studies show that the Fair Tax, when analyzed properly, that is, in terms of average remaining lifetime resources, benefits everybody, but it benefits the poor and middle class the most.
Those studies do not take into account the positive dynamic effects the Fair Tax would have on the economy, which would help the poor and middle class improve themselves. The Fair Tax also is more efficient and transparent that today's tax code. People can know effortlessly whether they are complying with the tax law.
Mr. Hornstein's writing would benefit from better scholarship.
~Jim Bennett
Summit, NJ
How Orwellian of Hornstein to call a tax where everyone pays the exact same percentage "regresssive" -- How Hornstein arrived at the conclusion that, when everyone pays the same percentage, the poor will pay a higher percentage, eludes me.
If a member of the working poor makes $17,000 and spends it all on taxable items, his tax will be $3910, or 23%. If someone in an upp income bracket makes $170,000, and spends it all on taxable items, his tax will be $39100, or 23%. How is that regressive?
It appears that Hornstein is simply choosing words for their emotional impact without making certain his statements actually qualify as fact.
Hornstein misrepresents the FairTax with points that have been repeatedly refuted. Just dropping Orwell's name with no proof of doublethink as it pertains to the FairTax proves nothing.
"FairTax: The Truth" was written in part to dismiss claims barely worth mentioning such as those found in Hornstein's column.
Common sense tells you that 61 co-sponsors of the Act plus thousands more would not be for such a bill as Hornstein presents.
For instance, not only does the prebate completely untax the poor based on current subsistence levels it also provides additional cash assistance for the poor by removing the marriage penalty that is inherent in HHS's published poverty rate schedules. Prove this for yourself by comparing HHS's Poverty Guidelines with those of The FairTax Prebate Table.
Hornstein states "The fairest basis for taxation is ability to pay." Karl Marx stated the same thing this way - "From each according to his ability to pay, to each according to his need."
This article is fantastic!
It strengthens the argument that the only reason for our current abusive tax system is because of a lack of understanding of viable remedies that have been well researched.
There have been proposals and studies on a National Retail Sales tax since the 1970's. Since that time, millions of dollars of private consumer money has been spent on studies that prove that a tax such as the Fair Tax would lead toward an economic boom.
Now that you have informative feedback, Mr. Hornstein, you can take a look at these studies and write another article. This time you will rave about the biggest potential for a renewed America that every existed.
Hornstein misleadingly compares taxes paid by the so-called rich & the poor.
Social Security taxes are capped at $106,800 of wages in 2010. The poor are never capped; all of their income is subject to the Social Security tax. Wouldn't you feel better knowing that all the money spent after enactment of the FairTax is subject to the FairTax? The writer states "people at higher income levels have more money available to pay taxes." So now they would.
Regarding the prebate, the poor would be untaxed up to the poverty level while the so-called rich would continue to pay the FairTax on all their spending. Just think of the added revenue that will support all the existing government programs & will strengthen Social Security & Medicare when it is supported by fewer income earners as the baby boomers retire.
Hornstein is so uninformed. This is the same set of talking points that opponents of national sales tax always trot out. People that oppose the fair tax proposal have something to gain from the current punishing system.
Mr. Hornstein, read John Linder's book and you will see how wrong you are. If you still disagree, the current tax credit system must benefit you.
In actuality, most "poor" people under the Fair Tax would not pay any taxes. The rich would pay their fair share of taxes on all the yachts and airplanes and other fancy things they buy. Even the illegal aliens and criminals would pay into the system.
It so simple that it's brilliant.
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